The Budget deficit improved by nearly €1bn in the period to the end of August compared with last year, but there has been a surprise drop in income tax.

The end of August saw the Exchequer record a deficit of €329m, compared with a €1.291bn overspend in the same period last year, according to the Department of Finance.

The improvement was driven primarily by a hike in the tax take, including higher than expected corporation tax receipts, and came despite higher spending.

The latest figures show tax revenue of €29bn was collected in the first eight months of the year. That is up €1.7bn on the same period last year.

However, tax revenues for the month of August were down €196m, primarily due to an under-performance in income tax and excise duties.

The near €50m decline in income tax paid during the month is a surprise, because there was no drop in the number of people at work. The drop in excise receipts was expected after stockpiling of tobacco early in the year ahead of new packaging rules.

Corporation tax remains the big positive this year. Receipts in August were €26m higher than the target, and for the year so far they are now €508m higher than expected, at €3.475bn.